TMI Blog1974 (12) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... ing these questions is filed by the petitioner who belonged to the former Indian Civil Service, was a former Chief Justice of a High Court and is now a retired judge of the Supreme Court on the following facts : The petitioner took a loan of ₹ 65,000 from his provident fund as a non-refundable advance in 1958-59 and spent it along with his own ₹ 13,000 in buying and reconstructing a house at Allahabad. He sold the said house in 1967 for ₹ 1,25,000 without obtaining the prior permission of the Government. As the petitioner parted with the possession of the house contrary to rule 7-E(1) of the Indian Civil Service Provident Fund Rules (hereafter called the Rules in short), the sum withdrawn by him became payable together with interest thereon amounting to ₹ 27,932 by him as the subscriber to the fund under rule 7-E(2). The petitioner paid the amount with interest to his fund accordingly. In calculating income-tax payable on capital gains under section 48 of the Act, the petitioner deducted from the sale proceeds of the house the interest of ₹ 27,932, as expenditure incurred wholly and exclusively in connection with the transfer of the house in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 147 of the Act because the interest paid by the petitioner on the loan taken from his provident fund was paid to the Government. It became a part of the Consolidated Fund of India, that is, the property of the Government. It was, therefore, expenditure incurred wholly and exclusively in connection with the transfer of the house within the meaning of section 48(1). (2) Even if the interest was paid into the petitioner's own account in the provident fund and thus continued to belong to the petitioner without becoming the property of the Government, this information was known to the Income-tax Officer at the time of the assessment. It did not become known to him subsequently. The said officer thus had no jurisdiction to make the reassessment under section 147(b) of the Act. Both these contentions were repelled in the defence. It was pointed out that : (1) The interest paid by the petitioner did not become the property of the Government and did not become a part of the Consolidated Fund of India. It was paid to his own account in the provident fund and remained his own property. It did not, therefore, amount to any expenditure by him much less expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the fund and not to the Government was not given by the petitioner to the Income-tax Officer. It is true that the Income-tax Officer could have himself found out from rule 7-E whether the interest was really paid to the fund. The fact remains, however, that this vital information was not apparent to the Income-tax Officer at the time of the assessment. The affidavit of the Income-tax Officer further states that subsequently the true and correct interpretation of rule 7-E was brought to the notice of the Income-tax Officer by the Revenue Audit authorities as well as by the Ministry of Law . This would mean that these two authorities pointed out to the Income-tax Officer that on a true meaning of rule 7-E the interest went to the fund and continued to belong to the petitioner. It was not, therefore, an expenditure by the petitioner. It is a mixed question of law and fact whether the interest paid by the petitioner was expenditure. The question of law is whether the payment of the interest to the fund meant a payment to the petitioner himself or to the Government. In considering the second question, we shall show that it amounted to the payment to the petitioner himself i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ither had the power or the duty to give such information in the form of an opinion to the Income-tax Officer. The externality of the source of the information has to be understood in this manner with a view to achieve the object of section 147(b). Bhagwati C. J. attempted to circumscribe the externality of the source of the income in the following words at page 193 of the report : It must be, as already stated by us, a statement or expression of the correct state of the law by a person, body or authority competent and authorised to pronounce upon the law, so that it is invested with some definiteness and authority. With respect, we think that this test, unless narrowly construed, is not materially different from the test of power and/or duty suggested by us above. It is in the light of this test that we have to decide whether the information coming from the audit department and/or the Ministry of Law could amount to information within the meaning of section 147(b). The question was answered in the negative by the Division Bench of the Gujarat High Court in the following words at page 194 of the report : The audit department is not an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditorGeneral of India is appointed as an independent authority not removable from office except in the manner and on the grounds as a judge of the Supreme Court would be removed. It is well-known that his department is divided into two parts, namely, accounts and audit. The function of the auditors is to examine and check the work of the Government officers, point out mistakes, if any, committed by them and lay down instructions for their correct working. The report of the Comptroller and AuditorGeneral of India on the functioning of the departments of the Government is submitted to the President under article 151 and is laid before each House of Parliament. The Public Accounts Committee of Parliament sees to it that this report is complied with by the Government as far as possible. The revenue audit is a part of this audit department. The officers of the revenue audit must be experts who can examine and check upon the work of Income-tax Officers. They are presumed to know the work of the Income-tax Officers including the law of income-tax. The Income-tax Officer has, therefore, to pay due regard to the notes of such auditors. As the revenue audit and the Ministry of Law have the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would come under the last element of the Consolidated Fund of India. This argument ignores not only the true interpretation of article 266 but also of the other connected provisions of the Constitution. Under article 284 all moneys received by or deposited with (a) any officer connected with the affairs of the Union or of a State in his capacity as such, other than revenues or public moneys raised or received by the Government of India or the Government of the State, as the case may be, or (b) any court within the territory of India to the credit of any cause, matter, account or persons, shall be paid into the public account of India or the public account of the State, as the case may be. It is to be noted that as contrasted with the Consolidated Fund of India, the public account of India contains moneys which are received by the Government officers or courts but which continue to belong to persons to whom such moneys are payable. They do not belong to the Government. The contrast between the Consolidated Fund of India and the public account of India is brought out by the following features, namely : (1) Under article 266(2) all other public moneys received by or on behalf of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereby. (4) The money and the interest on it is credited into the fund. (5) Such money is credited to the account of the subscriber. (6) Such money may be withdrawn by the subscriber ordinarily on his retirement or be paid to his nominees or heirs on his death or in certain circumstances even earlier but in all events it remains his money payable to him or his nominees or heirs. (7) The language of the Indian Civil Service Provident Fund Rules shows that the money continued to belong to the subscriber and does not vest in the Government. The Provident Funds Act, 1925, is applicable to this as well as other provident funds. It defines compulsory deposit in section 2(a) as one which is not repayable on demand . But for this provision, the money would have been repayable on the demand of the subscriber which means that it belongs to the subscriber. The repayment is deferred only because the money is held in the fund to provide for the eventualities of death and retirement. (9) Under section 3 of the said Act as also under section 60 of the Code of Civil Procedure, the money in the account of the subscribers to the provident fund is exempt from attachment. The n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that our finding on the first question is incorrect and section 147(b) does not cover the proposed reassessment, still the court would have the discretion to refuse relief to the petitioner. The law is well-settled that the issue of a writ or order in the nature of certiorari by this court under article 226 is not of course. It does not follow as soon as some legal infirmity is shown by the petitioner in the impugned order. This court has the discretion to abstain from interference if : (a) the conduct of the petitioner is such as to disentitle him to the relief, (b) he has not suffered any injustice, or (c) that the grant of the relief to him would result in injustice. All these three reasons are present in this case. The deduction was allowed to the petitioner without further inquiry because of his statement that the interest was paid to the Government while in fact it was paid to his account in the fund. The petitioner has been unjustly enriched at the cost of the public interest. To allow the petitioner to retain the undeserved advantage would mean that the burden of taxation which he should have legally borne is being misplaced. (The dicta of Lord Greene in Howard de Wald ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n guilty of laches, and there are other relevant circumstances which indicate that it would be inappropriate for the High Court to exercise its high prerogative jurisdiction in favour of the petitioner, ends of justice may require that the High Court should refuse to issue a writ. There can be little doubt that if it is shown that a party moving the High Court under article 226 for a writ is, in substance, claiming a relief which under the law of limitation was barred at the time when the writ petition was filed, the High Court would refuse to grant any relief in its writ jurisdiction. No hard and fast rule can be laid down as to when the High Court should refuse to exercise its jurisdiction in favour of a party who moves it after considerable delay and is otherwise guily of laches. That is a matter left to the discretion of the court ; in this matter too discretion must be exercised judiciously and reasonably. These observations were followed by S. M. Sikri and K. S. Hegde JJ., in Durga Prasad v. Chief Controller of Imports Exports (1), to make the point that the relief under article 226 is discretionary. High Courts have refused to interfere in their writ jurisdiction w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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